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Course : Financial Accounting

Faculty : Dr. Ullas Rao Email ID: ullasrao@sdmimd.ac.in
Batch : 2014-16
Term : I
Credits : 3

Introduction

Financial Accounting forms the foundation for any managerial discipline. An essential
knowledge of this discipline is indispensable for any manager. Why should you learn
accounting? Well, remember that corporate organizations are founded on the basis of
profit maximization and distribution of the same to its owners, also called the
shareholders. Shareholders therefore have a legitimate interest in the well-being of an
organization. This well-being for management purpose is always represented by
numbers like profitability, growth etc. Financial Accounting facilitates this process by
translating the activities of an organization into measurable terms by constructing
financial statements like Profit & Loss account or Income Statement, Balance Sheet, and
Cash Flow Statement. You will thus appreciate that by learning to read financial
statements, you are in a position to assess the well-being or the financial health of the
organization.

In this course, we need to understand one very important aspect. You are being exposed
to Financial Accounting to enable you to primarily take on the role of Manager
successfully. You are not here to become accountants! To become a successful
accountant, you have professional course like Chartered Accountancy. Therefore, the
coverage in this course will be restricted to things you ought to know in accounting so as
to make well informed managerial decisions.

It is also essential to understand that your ability to derive maximum benefit from this
course is primarily dependent upon the requisite practice that is put in by you. You will
be required to practice problems from the prescribed text and also appreciate the practical
application of concepts learnt by dwelling into the financial statements of corporate
organizations. Financial Statements along with virtually all other details (compressed in a
report called Annual Report) is available under the Investor Relations for all the listed
companies. Please make it a habit to review an annual report throughout the course. An
Annual Report of a leading company like Geometric Software will be consistently used
in the classroom to enable you to develop the ability of reading it. Please note that the
prescribed text forms the reading material. Articles and cases wherever required will be
distributed in class well in advance.

Finally, please understand that there is nothing to be afraid of accounting. Emphasizing
on understanding and appreciating the concepts will make the subject enjoyable. Rote
learninng has no place here.
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Let us together make efforts to derive maximum benefit from the course. All the very
best!

Dr. Ullas Rao
Email: ullasrao@sdmimd.ac.in

Course Objectives

a) To gain an understanding into the basic nature of financial accounting
b) To appreciate the importance of the three fundamental financial statements
c) To be aware of the basic concepts and conventions underlying the accounting
discipline
d) To develop the basic ability to read an annual report
e) To make informed decisions on the basis of financial statements
Course Module
The course on Financial Accounting is divided into five modules as shown below.

Module
No.
Content No. of
sessions
I Conceptual framework and constructing
financial statements
4
II Completing Financial Statements:
Incorporating Adjustments
6
III Companys Financial Statements: Assets,
Liabilities, and Equity
4
IV Cash Flow Statement: Preparation & Analysis 3
V Annual Report discussion 3

A brief description to the above modules and the reading chapters from the prescribed
text book follows.

Module I: Conceptual framework and constructing financial statements

Why accounting is important; Users of accounting; Basic terminologies; The three
fundamental financial statements; Concepts and conventions underlying accounting;
Understanding the double entry system Balance Sheet equation; Constructing basic
financial statements using Balance Sheet equation

Readings: Chapters 1 & 2 (R NARAYANSWAMY Financial Accounting)

Suggested number of sessions 4




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Module II: Completing Financial Statements: Incorporating Adjustments

Concepts of accruals, deferrals, provisions and depreciation; Recording adjustments;
Comprehensive illustrations on incorporating adjustments and constructing financial
statements; Accounting for Merchandizing organization

Readings: Chapters 3 & 4 (R NARAYANSWAMY Financial Accounting)

Suggested number of sessions 6

Module III: Companys Financial Statements: Assets, Liabilities, and Equity

Understanding the current and non-current assets, Inventory analysis basic methods of
inventory valuation; Non-current (Fixed assets) concepts, methods, and accounting for
depreciation; Liabilities: current and non-current including debentures, Equity: share
capital, reserves & surplus, bonus, buyback, and dividends

Readings: Chapters 6, 7, 9 & 10 (R NARAYANSWAMY Financial Accounting)

Suggested number of sessions 4

Module IV: Cash Flow Analysis: Preparation and Interpretation

Understanding the Cash Flow statements utility; Preparation of cash flow statements
direct and indirect methods; Comprehensive illustrations and analysis
Readings: Chapter 12 (R NARAYANSWAMY Financial Accounting)
Suggested number of sessions 3

Module V: Annual Report discussion

Preliminary understanding on consolidated financial statements goodwill and minority
interest; Chairmans letter; Directors report; Management discussion and analysis;
Auditors report; Notes to financial statements; Financial Statements Income
statement, Balance sheet, and Cash flow statement; Significant schedules

Suggested number of sessions 3

Readings: All Chapters (R NARAYANSWAMY Financial Accounting)

Evaluation criteria
Parameter Weight
(%)
Quiz I 10
Mid-term 25
Quiz II 10
Presentation 15
End-term 30
Class participation 10
Total 100
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Pedagogy

Combination of lectures, discussions, and hands-on exercises will be employed for
driving all the concepts with a practical framework.

Compulsory Reading: Prescribed text book

Financial Accounting: A Managerial Perspective, Fifth Edition, R
NARAYANSWAMY, Prentice-Hall India (PHI)

References

a) Accounting Text and Cases, 12
th
edition, Anthony, Hawkins, and Merchant, Mc-Graw Hill
b) Introduction to Financial Accounting, 9
th
edition, Horngren, Sundem, Elliott, and Philbrick,
Pearson
c) Financial Accounting for Management, 3
rd
edition, Ramachandran and Ram Kumar Kakani
d) Financial Accounting for Management, Shankaranarayana and Ramanath, Cengage learning
e) Financial Accounting for Management Text and Cases, Sharma and Vithal, Macmillan
f) Accounting for Management Text and Cases, Bhattacharyya and Dearden, Vikas
Publishing House